MBF I, LLC
0 Xxxx 00xx Xxxxxx, 0-X
Xxx Xxxx, Xxx Xxxx 00000
October 4, 1996
Protein Polymer Technologies, Inc.
00000 Xxxxxxxx Xxxxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Mr. J. Xxxxxx Xxxxxxxx
President and Chief Executive Officer
Ladies and Gentlemen:
This letter (this "Agreement") sets forth the agreement between MBF I,
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LLC, a California limited liability company ("MBF"), and Protein Polymer
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Technologies, Inc., a Delaware corporation (the "Company").
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1. Introduction. Commencing on the date hereof (the "Effective Date"),
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MBF will use its best efforts to assist the Company in increasing value to the
Company's security holders through expansion of the market, base, trading
volume, coverage and price for the Company's common stock, $.01 par value (the
"Stock"). Such services to be provided by MBF to the Company in connection with
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this engagement, when and as reasonably requested or approved by the Company,
may include, without limitation, the following:
. Advise the Company with respect to strategic business alternatives.
. Undertake due diligence examinations to enable MBF to familiarize
itself with the business, financial condition, operations, asset
values and prospects of the Company.
. Advise the Company with respect to the general structuring of
financing or strategic transactions.
. Advise the Company with respect to negotiating financing or
strategic transactions.
. As compensation for services rendered hereunder, MBF will receive
from the Company warrants to purchase up to 750,000 shares of Stock
(the "Warrant Shares"), all as more fully set
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Exhibit 99.6
Protein Polymer Technologies, Inc.
October 4, 1996
Page 2
forth herein. During the term of this Agreement, the Company shall provide
reasonable assistance to MBF in its efforts as reasonably required in order for
MBF to respond to due diligence requests by potential investor or third party
collaborators. MBF recognizes the confidential nature of certain information to
be furnished to it hereunder, and agrees to execute the confidentiality
agreement in the form attached hereto as Exhibit A (the "Confidentiality
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Agreement").
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2. Warrants.
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(a) On the Effective Date, MBF shall be issued warrants to purchase
50,000 Warrant Shares at an exercise price equal to the greater of (i) one
hundred twenty percent (120%) of the average between the closing bid and ask
price of the Stock on the Effective Date, or (ii) $3.75 per share.
(b) MBF shall be issued warrants to purchase an additional 100,000
Warrant Shares if, prior to January 31, 1997, the Company closes an equity
investment in the Company of at least $3 million. The exercise price of such
warrants shall be $6.00 per share.
(c) MBF shall be issued warrants to purchase an additional 250,000
Warrant Shares if, prior to January 31, 1998, the Company closes an equity
investment in the Company of at least $5 million (excluding the financing
described in subsection (b) above) at a price of not less than $4.00 per share
of Stock (or common stock equivalent) (appropriately adjusted for stock splits,
recapitalizations and the like). The exercise price of such warrants shall be
$6.00 per share.
(d) MBF shall be issued warrants to purchase an additional 100,000
Warrant Shares if the average between the closing bid and ask price for the
Stock during any 21 consecutive trading days between the Effective Date and
prior to July 31, 1998 is at least $8.00. The exercise price of such warrants
shall be $7.50 per share.
(e) MBF shall be issued warrants to purchase an additional 100,000
Warrant Shares if the average between the closing bid and ask price for the
Stock during any 21 consecutive trading days between the Effective Date and
prior to December 31, 1998 is at least $9.00. The exercise price of such
warrants shall be $7.50 per share.
Protein Polymer Technologies, Inc.
October 4, 1996
Page 3
(f) MBF shall be issued warrants to purchase an additional 150,000
Warrant Shares if the average between the closing bid and ask price for the
Stock during any 21 consecutive trading days between the Effective Date and
prior to June 30, 1999 is at least $10.00. The exercise price of such warrants
shall be $7.50 per share.
(g) Warrants issued to MBF pursuant to subsections (a)-(f), above,
shall be substantially in the form attached hereto as Exhibit B and shall have
a term of five years from the dates on which such warrants are issued and the
performance criteria therefor has been satisfied, and shall expire if not
exercised by MBF prior to the expiration of such five-year term. The vesting or
"earning" of each of the foregoing six warrants is not dependent upon earning or
vesting any other warrant. Once earned, such warrants, the Warrant Shares and
the rights associated therewith shall not be assignable by MBF without the
Company's prior written consent, which will not be unreasonably withheld, but
subject in all cases to compliance with applicable securities laws.
3. The Warrant Shares. The Warrant Shares shall be unregistered but
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shall have all other rights and characteristics (including par value, voting
rights and non-assessability) as the Stock at the time of exercise of warrants
by MBF. Not more than once each year, MBF shall have the right to demand
registration of the Warrant Shares at its sole expense; provided, however, that
MBF shall also be entitled to "piggyback" registration of the Warrant Shares on
any registration of Stock by the Company (subject to cutbacks on a pro rata
basis). MBF and the Company shall enter into a Registration Rights Agreement
substantially in the form of Exhibit C hereto with respect to such rights.
4. Consulting Fee.
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(a) As a consulting fee for services rendered hereunder, MBF shall be
entitled to receive from the Company (i) payments aggregating $100,000 in the
event of a closing of the transaction described in Section 2(b) above, plus (ii)
payments aggregating $200,000 in the event of a closing of the transaction
described in Section 2(c) above, in either of such cases within the time frames
set forth in such sections. Such fees, if earned, shall be payable in quarterly
installments of $25,000 in the aggregate commencing on the first day of the
Company's first
Protein Polymer Technologies, Inc.
October 4, 1996
Page 4
fiscal quarter following the closing of such transaction. The Company's
obligation to pay any fees earned pursuant to this Section 4 shall survive any
termination of this Agreement.
(b) In addition to the foregoing, in the event that Xxxxxx introduces
the Company to other business, licensing or financial opportunities, the
Company, in its sole and absolute discretion, may consider additional
compensation to Xxxxxx, but shall not be obligated in any way whatsoever under
this paragraph (b).
5. Expenses. The Company shall reimburse MBF for any pre-approved
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reasonable expenses incurred in furtherance of his responsibilities hereunder.
6. Term and Termination.
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(a) Unless earlier terminated, pursuant to subparagraph (b) below,
this Agreement shall commence on the Effective Date and shall terminate on
January 31, 1998 if the warrants described in Section 2(b) or (c) above have not
been earned by such date. If such warrants described in Section 2(b) or (c) have
been earned by January 31, 1998, this Agreement shall terminate on June 30,
1999.
(b) Notwithstanding anything herein to the contrary, the Company may
terminate this Agreement by written notice to MBF:
(1) in the event that MBF or its affiliate, Xxxx X. Xxxxxx, has
(i) committed a material breach of the terms of this Agreement or any other
material legal obligation to the Company and failed to cure such breach within
thirty (30) days of written notice to MBF that such breach has occurred, (ii)
failed to perform any of the material obligations under the Confidentiality
Agreement, (iii) demonstrated gross negligence or willful misconduct in the
execution of the services rendered hereunder, (iv) been convicted of or pleaded
nolo contendere to a felony or other serious crime, (v) been sanctioned or
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enjoined by any regulatory or quasi regulatory body or agency, including without
limitation the Securities and Exchange Commission or the National Association of
Securities Dealers, Inc., (vi) engaged in business practices which, in the
opinion of the Board of Directors of the Company, as confirmed in
Protein Polymer Technologies, Inc.
October 4, 1996
Page 5
a duly adopted resolution, publicly disparage the Company, or (vii)
misappropriated assets of the Company; or
(2) upon the closing of a transaction, or series of related
transactions, pursuant to which (i) the Company sells all or substantially all
of its assets to an unaffiliated third party, or (ii) an unaffiliated third
party or "group" acquires more than 90% of the outstanding voting stock of the
Company; or
(3) in the event that Xxxx X. Xxxxxx ceases to own 75% of the
outstanding equity interests of MBF.
7. Representations. As an inducement to each of the parties to enter
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into this Agreement, the Company represents to MBF, and MBF represents to the
Company, that it is authorized to enter into this Agreement and that the
execution, delivery and performance of this Agreement, and the consummation of
the transactions contemplated hereby, have been duly authorized by all necessary
corporate action, and that the execution, delivery and performance of this
Agreement will not violate any agreement to which it is a party, or violate or
conflict with any law, rule or regulation applicable to, or binding upon, it.
The representations set forth herein shall survive any termination of this
Agreement.
8. Costs of Enforcement. In the event of any dispute related to or
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arising under this Agreement, the prevailing party shall be entitled to recover
from the nonprevailing party its costs and expenses related to such dispute,
including reasonable attorneys' fees.
9. Company's Absolute Right of Rejection. Notwithstanding anything
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herein to the contrary, the Company shall retain the right, in its sole and
absolute discretion, for any reason or no reason, to reject any offer, proposal,
bid, subscription or other arrangement related to any financing or arrangement
contemplated hereby, whether or not MBF would earn any fee or receive any
warrants as a result of the consummation of such financing or arrangement.
Protein Polymer Technologies, Inc.
October 4, 1996
Page 6
10. Miscellaneous. This Agreement shall be governed by the internal
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laws (and not the law of conflicts) of the State of California. This Agreement
is personal in nature and may not be assigned by MBF.
If the foregoing is consistent with your understanding, please execute
the attached duplicate original of this letter and return it to my attention,
whereupon this Agreement will become binding upon us.
Very truly yours,
MBF I, LLC,
a California limited liability company
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx, President
ACCEPTED AND AGREED TO:
PROTEIN POLYMER TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ J. Xxxxxx Xxxxxxxx
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J. Xxxxxx Xxxxxxxx, President
and Chief Executive Officer
Exhibits
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A - Form of Confidentiality Agreement
B - Form of Warrant
C - Form of Registration Rights Agreement
